In the Spotlight - Stolichnaya
It has survived the Iron Curtain, endured rationalisation in the global drinks industry and numerous changes in its distribution and even a feud with the Russian state, but Stolichnaya is still standing strong.
The Russian vodka brand that has weathered many a storm is now believed to be up for sale, with reports this week that the owner of the global rights to the brand has hired an investment bank to investigate a potential sale. These sorts of rumours appear almost daily in the press, but this particular brand is attracting greater than usual attention. The brand's colourful history may have something to do with it.
Since 2001, the Stolichnaya trademark has been an object of dispute between the privately-owned SPI Group and the Government of Russia.
Soyuzplodimport (SPI), the private vodka business born out of the old communist-state alcohol business, bought the Stolichnaya trademark - along with 42 other brands - in 1997 for US$300,000. The Russian Ministry of Agriculture has since contended this, believing it was bought far too cheaply and that the whole position of SPI was "questionable" at best.
When SPI was set up on the back of its bankrupt predecessor, it hardly even changed its name, dropping only one "o" from the original business name Soyuzplodoimport.
Russia subsequently renationalised Stolichnaya on the domestic market and - with little success - has tried to claim back the rights for the brand on international markets too. SPI was forced to move the bottling of Stoli for its international markets to Latvia.
The battle has continued to rage since, and has even resulted in an arrest warrant for Yury Shefler, a major shareholder of SPI.
Whilst the fight for Stolichnaya has been in and out of the press for years, this current round of speculation pertaining to its future has arisen since Pernod Ricard won the bidding war for V&S, the owner of rival vodka Absolut. As it stands, Pernod has a distribution deal for Stoli with SPI for the rights to the brand in all markets, with the one exception of Russia.
However, following Pernod's purchase of Vin & Sprit in April, the French company has said that it will bring this arrangement to an end. It was assumed SPI would seek out a new distribution partner. However, the reports of Lehman Brothers' involvement, suggests an outright sale may be on the cards.
Rumours yesterday (18 June) that Campari was looking at buying opportunities in the spirits sector, helped fuel reports that it was monitoring the possible sale of the vodka brand.
It should be no surprise if Stoli pricks the interest of all the above and more. Vodka continues to be the category to be in in the global spirits business.
In 2006, vodka was the largest growth category of any major international spirits sector. Total global consumption was up in 2006 by 1.6%, or some 8m cases, to top 513.5m cases, according to IWSR's statistics.
Impressively, vodka posted growth in 37 of its 50 largest markets, and in 11 of those markets, it posted double-digit growth. Europe, including Russia and Ukraine, represented 78.7% of global vodka sales in volume terms in 2006. Unsurprisingly, the bulk of the European volume remains based in the vodka heartland of Central and Eastern Europe.
The Americas, which accounts for 12.1% of global volumes, reported a 6.7% growth in 2006 to 62.2m cases. This was driven chiefly in the dynamic US market, and to a lesser extent Brazil.
This in turn has created a boom in M&A and marketing activity for global vodka leaders.
Aside from Pernod's US$8.73bn acquisition of V&S, Diageo recently bought a 50% stake in the Dutch-owned Ketel One, for $900m. And then there's San Francisco-based Skyy, which has just embarked on a multi-million dollar advertising campaign to relaunch its vodka in the UK market.
In the UK, even food companies are trying their hand in the sector. Tyrell's, the potato chip company, is turning the potatoes that are too small or large to be made into potato chips into vodka and selling it.
So whose hands is Stolinchnaya likely to fall into?
Spirits journalist Patience Gould wrote last month that she believed Fortune Brands to be the most likely solution to Stoli's distribution gap. Now that the deal looks likely to be an outright sale, the US group remains a strong contender.
Even though the Fortune option makes sense for the brand, Patience believed the "headache of ultimate ownership" still remained - this is even more pertinent should SPI try and sell Stolichnaya.
Unless Stoli's current owners can come up with a solution to the question of ownership, the battle with the Russian authorities over who actually owns the brand outright will prove a major sticking point in negotiations.
Stolichnaya is an important global brand with a hugely rich and colourful heritage - ultimately a great asset to any of the major spirits players. But any new owner at this point will be confronted with a legal headache and little love from Russia.
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